tv Discussion on Economic Policy in the George W. Bush Presidency CSPAN December 24, 2015 8:23am-9:38am EST
i'm patrick sochi, dean of the school of business here at hofstra university. welcome to hofstra university and the session on economic policy in the bush administration. working with me today at this session is our provost, doctor harmon berliner will be asking questions and we are happy to have the three presenters. although, one is still at the airport and hopefully will get here in time, but if not we will still have two magnificent speakers here who can give us real insight on how economic policy development in the dip-- bush ministration and you can probably than extrapolate how it may happen in other ministrations. our first speaker today is thea arrhenius, currently she is vice president and senior economist at the federal reserve bank in dallas. she is a labor economist working on regional economic growth and demographic change. she manages the regional group
in the dallas federal research department and is executive editor of the quarterly publication, southwest economy. for academic research focuses on the labor market impacts of immigration, unauthorized immigration and us immigration policy. she is a co-author of the book, beside the golden door, us immigration reform in a new era of globalization. she is affiliated with several academic institutions and is a research fellow at the tower center for political science at southern methodist university and at the ica institute of labor in bonded germany as well as a visiting scholar at the american enterprise institute. she is also an adjunct professor at baylor university where she teaches the executive mba program. she was senior economists on the council of economic advisers in
the executive office of the president in washington dc in 2004, 2005 where she advised the bush administration on labor, health and immigration issues. she all-- yield a phd in economics from the university of california and los angeles and at ashley's degree economics and spanish from the university of illinois. our second speaker is philip swaddle. philip swaddle is an advisor to evenflo micro and countries to the firm economic and political policy analysis. he is a professor at the international economic policy at the university of maryland school of public policy. he was assistant secretary for economic policy at the treasury department from december 2006 until january 2009, serving as chief economist for secretary henry paulson. he was previously chief of staff
at the white house counsel of economic advisers from 2002 to 2005, and on economist at the imf, the international monetary fund and of the board of governors at the federal reserve he was involved with a range of policies including tarp, housing, energy, environment, pensions and macro analysis and has been specially involved lately in the policy efforts concerning housing, finance reform and broader financial regulatory reform. mr. swagger received a phd in economics from harvard university and a bachelor of arts in economics from princeton university. our third speaker, hopefully he will get here in time, is mark sunderland. evenflo was founded by mark sunderland, previously he spent 10 years as managing director of global economic consulting firm and during that time he traveled extensively to japan, china,
arabia, germany, great britain, france italy and switzerland. from 2001 to 2002, he served as deputy assistant to the president for act now policy and deputy director of the national economic council. in that capacity he helped the president of the united states development and implement his economic agenda and also worked as a economic policy advisor for the george w bush president after he started his career at the us senate budget committee. he holds a master of arts of applied economics from john hopkins university and a master of public policy from duke university where he was senator jacob jack pella. he graduated magna cum laude from georgetown university and currently serves as a board member dow arabia, has consolidated affiliate based in kuwait city and is on the board of the virginia hospital center
medical brigade. so, thank you and i will now-- mr. schwager will start with his remarks and he also has mr. sunderland's remarks if he does not get here in time and then she will present her remarks and we will have questions. thank you. >> thank you very much. so, i will start with mine and mark should be here in the next couple of minutes and if not i have his and i can talk about that as well. so, i was at the end of the administration that assistant secretary for economic policy for the treasury department and essentially to the economist for secretary wasson and was confirmed by a voice vote of the senate just before the senate flipped in december 2006, so when it changed and it changed from leader frisk to leader
reid. back then noncontroversial nominees that approved routinely , so that is different. i previously served as a council of economic advisor where he and i were colleagues and also when mark was a deputy at the nac and as i say first in a nonpolitical position the last six months of the claimant administration in the first six months of the bush administration work and trade policy doing that with the international monetary fund. then came back a year later in a political decision as chief of staff. so, mark will tell you later about the campaign, but i will just preemptively confirm something that i know he will say about the seriousness of the campaign policy planning and the way that affected economic policymaking in the bush administration. again, i was at the first day of the administration as a nonpolitical appointing and so it was very typical in meetings early in the bush ministration to hear discussions about how
proposals or whatever was considered, how did that lineup with what was discussed during the campaign, so the campaign promises then president-elect bush were taken seriously, which was fascinating and i suspect it played different than some other administrations. in treasury are worked on a range of issues and the crisis dominated much of my time. i worked on social security, immigration, healthcare, a bit on energy and the environment and all of these areas are one in which the bush administration had a serious policy proposals that would address serious challenges facing our nation and deserve consideration on their merits. my sense especially if-- after 2006, that is starting with the new commerce in 2007, they didn't exactly receive that serious consideration, but that
is a fact and effect of our polarized system. so, that's the way congress work to then and that's the way congress worked over the last couple of years. so, let me talk a little bit about the financial crisis in the last of 11 minutes here that i want to talk. which, obviously the center of what i worked on at the treasury department and i will try to use that to illustrate more broadly the way economic policymaking worked in the bush administration. le says i sought. in the treasury and drug administration, the white house, housing and urban development in other parts of the executive branch, we were well aware of the building imbalances and the problems in the housing sector in that economy more broadly. if you google's wiggle financial crisis you will see that i have written on this extensively. maybe it's my fault, but you
will see what i have written. across the administration responded as the white house and had especially efforts were made to come up with policies to lean against the contraption of credit availability of the responsible way there was discussion on what is the role the government and what it are the to the spread of credit. why is it that credit where the people were getting credit, were getting mortgages before, maybe too easily, but now they cannot and what was the role of the government in addressing the and their proposals from the fha, the federal housing administration and had in other parts of the government to address this, so and sometimes not assuming markets are perfect and not assuming we say positively and sin there is zero for the government, but i would say was a high mark for action
to avoid the possibility of unintended consequences and obviously compared to other ministrations there was less government involvement, but not by far, not the caricature of nine. the crisis manifested in august 2007. policy response from the fed and from the administration again the focus was how to help the market adjusts, so the treasury, their proposals on what to do in liquid assets and proposals how to avoid preventable foreclosures. the government-- the bush administration did not propose taking taxpayer money and saving people from foreclosures, but the focus was on saying that foreclosures costly. it cost the bank and funny, cause the family involved and it's terrible and costly personally and financially and so there should be away for the two parties to work things out and it wasn't working very well and so that administration and
the treasury secretary personally were very engaged and getting that process to work better. was interesting in my mind is that these efforts were later used as the basis for housing related efforts from the obama administration. they of course put taxpayer money into it to lots of criticism. why am i paying taxes so she can buy her third house and have a big screen tv. so, i think the policy was more effective than people think for the obama administration, but they should take a lot of criticism and actually do book about the crisis that makes this connection and calls the obama approach to helping us wiggle plan, which is met as a pejorative, but i was gone genuine 20: 2009 in the plans had nothing to do with me. so, briefly the way i think of
the crisis is in a three phases. from august 2007, 2 march or april was kind of the normal policy response. the fed was doing its normal policy response and lowering interest rates and of course bear sterns collapsed in their acquisition signaled this was no longer in normal slowdown and the motive of work within these administrations and change. the work was being driven out of the treasury department and it's appropriate that i speak about it, but it was very well corneille within the administration. again, the way the policy process worked is that generally the natural-- the deputy at the beginning of the administration would coordinate a policy process and bringing in the other parts of the administration that were nationally involved. so, the financial process-- crisis response was typical and unusual.
typical in that the process worked and their continued to be the sort of process that mark will talk about at the beginning. but, by the end of that administration the process-- the work was heavily driven out of the treasury department. it was natural given the nature. so again, if you do the google search you will come up memos that were written about potential government plans to address the crisis. the third phase then was from september on with the failure of fannie and freddie, lehman brothers and more and the way i think of this is that-- actually, my boss had a saying
that was constructed. people were saying it was tough to do this, but to bailout a company or take this action to invest $350 billion of taxpayer money in banks, 250 billion and his response was it is not a hard decision. is just an unpleasant one. he said is the right thing to do and i know it has to be done. i don't like doing it, but it has to be done and i think that was the approach. i suspect that sort of approach would apply for president bush as well. that he had a set of core beliefs and i think mark will talk more about, but addressing a crisis is very pragmatic man in a very pragmatic administration, so i would look at the work that was done during the financial crisis as following the .-dot script
exactly and to me what's fascinating is that with the new administration starting january 2009, continued the work. continued with essentially superficial changes and people working on the tarp continued including the head of the tarp. one of the architects of the whole thing, crisis response. so, this is a great deal of continuity in the financial crisis response. obviously, the president and none of us were happy about getting to this point, but i think the administration's record can be clear that the response was appropriate and ultimately affected. so, one must thought, which was obviously the economic policy at the end of the administration was nominated by housing by the financial crisis response, which meant there are things left undone. president bush started climate change agenda, gathered g20 nations for the first time on this, his work on financial
regulatory reform, social security reform, tax reform, a whole host of other issues and somehow got crowded out by the financial crisis, but that is the way had to be. why don't i stop there. be make your next event thank you for having me and sorry to come in late. you can tell how long i have been away from working for president bush because being 15 minutes late would've been grounds for termination back when i worked for him. i started out for you for governor bush in june of 1999, during the campaign and i worked until a year after 911. when the time i was in the white house, the bush administration, president bush averaged 71% approval rating in the polls so my perspective is different and often a cycle to the presidency and work at the beginning of the administration is often
different than working at the end, so we will probably tell you those were the good old years, that when you are running for your life on 911 they don't feel like the good old years and if you look at that-- any president we have every single day in the white house is hard and you can see the constant rain that goes on whether it is good times or bad times, so i want to start off of that with the campaign. i feel strongly that the policy making the bush campaign was actually much more serious than in most campaigns. president bush had a absolute rule that everything we proposed had to have a chance of becoming law, so there is nothing fantastical, nothing-- no plot taxes, gold standards or universal healthcare. they were all very pragmatic, that's not to say universally popular, but they were all things that with a little bit of effort could actually become law. we over the course of the campaign produced teufel policy brooks.
these are things you have not seen in more recent campaigns. we kept an actual cbo scored budget and all of our proposals on taxes we had scored by the official scores in congress, set the point of the election in 2000, everyone knew how much the bush tax plan would cost. they knew distributional's weather how much was going to the rich, how much was going to the poor. you knew about problems like that in p and that's not to say you like the tax plan are not, but it was an honest way of saying it that things are out there. so, when we started, governor bush as when he was in texas, had run on four things and he had kind of had for a congressmen's and one of the bigger one was cutting taxes and so that was something he believed in and was going to be more part of the campaign. so, what he did was assembled a team of 10 very prominent outside economists who included
to past cea chairman, former federal reserve governors, two former top officials and charged them with a developing a tax plan that was both something that could eventually become law , but also something that would be more enough to survive a steve forbes like challenge from the right during the campaign season. now, seems a bit crazy into mt 15 to imagine people in 1999, being scared of steve forbes, but yet come off the 1996 campaign as one of the thought leaders on the right, so we started a process that went for about six months and within those 10 economists there were very different reasons they wanted to be embedded within the tax plan. and the more philosophical conservatives started with the fundamental premise that the
government was in surplus, that the surplus is inherently goes-- belongs to the people who earn the money and therefore part of it should be returned it to them and that was a philosophical point. we also had and people don't often realize we had a number of neil hayes ends in the group and for them to focus was that the expansion was starting to get pretty long in the tooth and that we in year eight or nine in the expansion and the idea that we would make another four years without a recession seemed not to be consistent with history. this was something that then governor bush was sympathetic to having started off in the royal patch in the 80s. texans are sensitive to the fact that there is a profound business cycle. than we had a group that were very big supporters of reforming social security and they wanted to use most of that money for causes like that and therefore wanted a smaller tax plan.
so, that was the tension that operated in the end. president bush decided on a plan that would phase in moderate rate reductions over five years and internally we had discussions about the economy and that would be available to speed up to divide more demand and seven we get past the election and come into office and there is always a little bit of tension at the beginning of an administration and in particular wide with the treasury secretary and some in the new members of the team who wanted to start claim. and essay the campaign is over and now, we have a new set of bigger group of people and led to start from scratch. governor bush had a very different mindset, which is that elections matter and he was planning to govern on what he campaigned on and continued the theme of only developing a campaign that could become law,
so we stuck with the tax plan. i was part of a three person negotiating team on that hill and we just-- negotiated over five months and it became law in may of 2001. one of the lessons i learned during those negotiations was that in-- this applied to all presidents is that members of congress are not going to take political risk that the president himself is not going to take and so i could talk about any economic argument or tax policy argument, but at the end of the day, what they wanted to hear was everything about the tax plan was out and public at the point of election and the president had survived and had actually taken political risk on that point and after that point it was not as hard to get the votes. when the demo before the senate, it got 63 votes. history remembers it by parson, but that was a democrat-controlled senate including the chair of the finance committee who supported the plan and i think another
lesson from history is that things have to have some amount of bipartisanship or they will be relitigate it time and time again and that's been a problem with the affordable care act when there was not a single republican person to vote for it and it's just going to keep coming up and up and up. we then go on, the economy as we approach the 2000 election was clearly weakening. the first quarter 2000, when that a commie contracted 1%, contracted another% in the third quarter of 2001. after the events of september 11, it was apparent in november and we put the vice president to meet the press and have him say we are on the front edge of a recession. you can actually see these things before congress will declare them. the data starts to move pretty decisively. we then started to work on accelerating the tax cut.
the only part we could politically get accelerated was the oh income part and so in august 2001, checks went out across the for $600 per person. is hard to tell if those worked at all because they literally went out about three weeks before 911 and the data got so bad for a couple of months that it either helped a little bit or didn't help at all. it's very hard to decipher that. the economy then continued to be what we would call sluggish through 2002, and into 2003, in part held back by the debate about going to war. so, that president made a decision to accelerate the marginal rate cut and was able to get that through congress and in may, 2003, the fall tax plan hit for the first time. the third quarter of 2003, the economy accelerated by 6.9%. over the two years after the tax front of effect, it accelerated by 320%.
these were the best couple years of the presidency and i think it was a historical lesson from president kennedy and from president reagan, tax cuts that are permanent in nature are more powerful economic affect them those that are temporarily and have a much beer cost, but you have to decide if it is worth it or not for the effect on the economy. i will probably go ahead and stop there and turn it over, but i wanted to give you a bit of flavor of what the tax policy was like during the administration and we can talk more about the national economic council worked during questions and other things like that. >> so, i was not a lyrical aplenty in the administration. i was a staff economist and phil hired me. thank you, phil. it was a most exciting here in my career, so far. i had three chairman in my one year ca, which might be a record. i came in under craig, an
amazing guy, macroeconomists, professor at harvard and then after that it was harvey rosen for a time and then at the end than breaky, so i had amazing chairman, amazing economic thinkers and i really had such a rewarding year, surrounded by some of the brightest economists that i have ever met, really. so, the reason i think he hired me was because in january 2004 as mark described we were coming out of a recession in 2001 and jobless recovery for two years, little over two years and so immigration, which is my field had been taken off the table. i don't know if you remember when bush run-- when the election and very soon in the first term he began talks with the president of mexico on immigration reform and an immigration plan with mexico and i was-- we got the sense,
although, mark you probably know this is true that an immigration was imminent, but that was the week before 911 and then after 911 immigration was not mentioned for two years for obvious reasons, but those who yearn for immigration reform were set about 911, for many reason, but that's another reason because that reform was squashed and unimportant opportunity was lost, but anyway i came with high hopes that maybe this would be the year for immigration reform and of course, once this presents a new term began we started immigration talks in earnest within the white house and i thought we made a lot of progress. we worked mostly on what a temporary worker program would look like, which was going to be the hardest part of the immigration reform and something that obviously congress had not really hammered out yet, so we
worked a lot on that. it was nice work in a field on a topic where president bush really had very strong guiding principles for us. in the felt very strongly and also understood it very well be in from a border state. you know, having huge hispanic support in the election, i think, for republicans he had done very well and he is very close the issue. provided great guidance, that the very strong working on it. i felt like we knew what we needed to come up with. of course, immigration reform never did work out. i mean, that mccain kennedy bill did eventually passed the senate, but not the house and was never taken up, i believe. the house in 2007, would respond with border security and fence act and lots of enforcement, more border enforcement and more interior enforcement and from then-- from there on the
situation for immigration reform certainly deteriorated from my point of view, anyway. and if you see president bush today i think he will openly say, you know, his big regrets was after being elected in the beginning of the second term focusing on privatization of social security instead of immigration reform and he will tell you that and i think he really means it because the issue is close to his heart. i think that concludes my prepared remarks and i'm happy to take questions. 's next zero, we will ask a number of questions and we will welcome the audience asking questions, so i guess the question to start with all three of you, what was the long-lasting effects of the bush administration economic policy? what withstood the test of time? >> eye contact-- think of two things. first is tax policy and i
delight in saying this. the brush obama tax cuts permanent, so, i mean, i'm delighted to say that because there are so me people who for a certain period would wake up in the morning before brushing their teeth with think about how terrible the bush tax cuts were and of course president obama four or a year or two extended all of them including the top rates, everything and so acknowledging the positive impacts on the economy and the negative ones from reversing them and then made permanent the vast majority of them. including the overall guiding structure, so i think that's a permanent change or as far as a republican goes, relatively permanent change. the importance of tax policy. number two though, i say with a bit of a small, the bed was polarization and we can't replay
the decade in the current time, but i think i'm proposals of social security, health care and other things that sort of never got consideration and assorted the debate was symbolic and political and not substantive and this falls everywhere all around, but i think that continues and is so that's also, i think i long-lasting impact of the administration. >> i think from my time when i was there, i think history doesn't give him enough credit for how shallow and brief the 2001 recession is. that was the time we had a massive collapse of the stock market bubble and chileans of wealth loss in the confidence was very low for a month or so after 911 and that was the period where the economy could have really ceased up and it didn't for a number of reasons. if you go back over the data, it
was extremely extremely small and if so i think the economic performance over the first term was actually pretty good, given that we came in with massive stock market over evaluation and huge corporate indebtedness that had to be adjusted. oddly, i think on economic policy, little more optimistic on immigration and so i think we may look back 15 years from now and find that president bush was on the right side of immigration and that we are in a temporary working out period for the party and hopefully it will go back to a more welcoming stance. one of the things i tell politicians and make it very simple and think about immigration policy is there is really wide measure of a country economically over time and that is our people trying to get into it or trying to get out of it and so if you tell me the
biggest problem the united states of faces is that people are trying to get into it from all around the world i hate would rather worry about something else and i think this debate hopefully will depend a lot on who the candidates and the republicans take next year, but people might look more kindly back on president bush were having been on the right side of that debate. >> i think a key piece of the bush legacy will be bringing education policy into the federal government. i think that's no child left behind, although, i'm not sure what state it finds itself at the moment, but maybe has not carried over into the obama administration, but i think this idea that president bush had even in texas he was an education reformer and took this with him to washington and had very high, i think, it says a lot about him first in terms of political philosophy and we talked about this earlier today in a session and i think he was
a president who believed the government could be very purposeful and that it had a purpose in education and a role in education and i think the conversation when i was a ca on education policy i found fascinating because the high standards that they were setting, which i thought were unrealistic, but it was great. it was great: the foundation upon which no child left behind, although, it's very controversial i think the transparency and account ability are important and i think we will never go back. >> you have touched on this and indicated president bush had strong guiding principle on immigration. where else did he have strong guiding principles when it came to the economics of the country? >> coming he definitely had a belief of the principle that taxpayer money first and foremost goes to the person who earned it and that is something that is not very widely held in
washington at all. so, when you sit down to a discussion about what to do in the budget, it's a higher standard to have. but, he also believed, you know, very much that the end it was not-- in purpose with economic growth. economic growth was there to serve the people who needed it most and you had to policies like education policy that would be kind of backfilling along the way, so that if you have strong economy you also have everyone participating in it or as widely as you could. >> lets see if there are some questions from the audience, if not patrick sochi and i have a whole list of questions, so we are ready. professor crotty. >> is the moment for immigration
reform gone? was there that brief moment of hope and in the beginning of the bush administration and is it in our future? >> well, that's a tough one. no, i mean, there is this huge looming problem out there that has to be addressed. i wonder, though, if it will now get addressed in the next administration has obviously-- i mean, if-- i mean, we thought it was that a year ago and has gotten worse in november with the executive action, the obama administration in the sense that something that was extremely controversial already became even more controversial and now holds a set of issues that has been piled on to what is really again a controversial topic and
do so now it's about presidential overstep and so forth and what are the limits of executive action and every thing, so that is now thrown into the debate on top of everything else, but i think that-- i mean, i think the way to do is out there and i think we know how to do immigration reform and we have come a long way. i mean, after i left-- when i was in the white house no one would ever have suggested that undocumented immigrants might get temporary status and not a pathway to citizenship. when everyone was still thinking along the lines of the 1986 immigration reform. ..
>> i have two thoughts on that about the politics and that's one from 2007 at one from 2014. in 2007 the treasury, i participated all of it in immigratiimmigrati on discussions and the discussion then at least just a part i participated in, not the entire discussion, was really about members of congress to the right of john mccain. what can we do to make them feel
better about supporting the proposal? there's a number of things aimed at border security and people here illegally and things like that. you know, politically seemed skewed in one direction and, of course, one can look at the insidoffensive look at presidenh at the time said before the search was clearly working and really needed the support against critics in iraq, senator reid think it's a lost war and things like that. again before president bush's surge policy work in iraq. still 2007. 2014, what's fascinating is president obama paused his executive action to allow the endangered democratic senators to have a chance at it didn't work out well but he paused and didn't wait long enough for the new congress have a chance.
i understand it politically why the pressure was on him, from the white house perspective he might have said look, speaker boehner, he can' can control his caucus, no point in waiting. it's fascinating to me he never did give the speaker a chance to fail. i think that's really too bad. but i agree with pia it's going to happen come is just where in all of the above allegedly induced timeout. i've named the person i think he was responsible for the timeout and i think we need to wait for it to end. >> professor? >> at 2001 tax cuts have been the subject of much debate as far as what the long-term effects are. certainly the short-term effects were very strong for the majority of american families. that cute issues i was wondering, i guess you raises
the tax estimate comes to which he and others would like to comment, the wealth gap, the question of growing inequality in the united states and the question of whether the tax cuts they meant less money for the government when it came to waging war in iraq. and so that tax cuts meant more money for american families, less money for some of the foreign policy needs, and also more recently infrastructure questions. i guess if you could speak to those questions. >> one, you always start with the numbers. so the bush 2001 tax cut cost $123 trillion over 10 years. so it's a lot of money. it's also about the same as the obama stimulus plan cost in one year, till it's not sometimes
the rhetoric doesn't always match reality. also the biggest by far differences in what happened to the surplus were more based on changing economic performance that if you do so in a recession or two, that just blows out your budget numbers much more than anything else. you see huge declines in bonus income and capital gains. and so i don't think the tax plan in any way restrained the spending on the cost of the war. i seem to go on on its own trajectory. but yet there is a choice between government finance infrastructure spending and tax cuts just like have a choice between tax any type of government spending so that is a government decision to i would just point out we have actual date on what happened after the tax cuts happened that make it a decent argument for why they should have occurred.
i forgot what the second -- the one thing on the wealth gap, one thing that is important is the growing wealth inequality and wellpoint tax cuts play in that. mathematically by far the biggest contributors to the wealth gap is federal reserve policy, which is designed intentionally to drive up asset prices. so if you want to objectively measure wealth inequality over the last five years it is done mainly by the federal reserve. it is a very different standard for judging monetary policy for some reason than for tax policy. when the exact same trickle-down economic arguments might want to make could be applied to monitor policy just as well. i would a lot of times i'll policy tends to have that distribution will effects. >> it made me think of a funny
story that i guess marc, and one once i left the white house by then. so in the fall of 2003 i can remember, i could remove exactly the date by look at the counter from the bureau of economic analysis. it is a situation that ahead of the cea did not come to our to diner and then the white house, a bigger one and a smaller one and this one is our higher rankings do. for reasons i don't understand, the head of the cea didn't have a smaller one have access. did make sense. as the chief of staff i just passed, i didn't tell my boss, i just asked the head of administration can we fix, and it's tough getting a decision to i don't know why but whenever things, it's not that big of a deal. the date in the fall of 2003 that we had a massive positive gdp number, like plus, plus the
seven-point something, then was revised. showing the 2003 tax cut was working, the request was approved for that day. you know, it's just the way it happened. doesn't matter. that's policymaking. on the second of the question about longer run effect i think it's a good question. in my mind the administration in 2005 made a good effort at social security reform. it's started just as i was leaving. does it focus on privacy account safeguarding people's assets. you can have a conversation about whether that makes sense and why, but you can imagine doing it differently than focusing on this is about fiscal responsibility in the long run future and our children and things like that.
i think that it's a debate we haven't yet had. in some ways we'r were going ine opposite direction with people saying, you know, or i should say actually, there's wide agreement on increasing social security benefits for people who most people on social security for the. so paul ryan's social security plan has a feature, and cedric elizabeth warren has proposed this as well, there is less agreement on entitlement benefit for people with high lifetime incomes. summer with a high lifetime income is probably not depend on social security for the foundation of their retirement. so you can imagine saying to the person, pay more in taxes or we will give you less in benefits. and, of course, right, as in businesses it will target those are the same over the lifetime, extracting from mortality. what's fascinating to me is this polarizing debate about things that mathematically are quite similar, cutting benefits for
the rich and raising taxes for the rich. it's the kind of debate we haven't really engaged in for our society. hopefully the next president will do that. >> yes, please. >> we heard about trade policy so i would like to get each of your thoughts on trade policy under president bush. you could argue with a number of agreements he signed when he was pro-trade or the most free trade present with overhead. one of the into place just -- would've implications going forward in terms of trade policy, if you see any? >> that was one of his core principles as well. it comes with being a border state that he definitely believed in. you know, in trade policy, kind of fundamentally in his bones. from my time that i was there that big piece on the agenda was getting trade promotion authority, which had lapsed into a power that was before the president to go into conduct
trade deals. and even in 2002 trying to get that bill through a republican house, we had to hold the vote open for four extra hours and twist arms to get it to pass by one single vote. and so trade stuff is always very hard to get through the congress. and that was before kind of the rise of china and other things that may be put more downward pressure on wages and other things here. and so he was, you know, certainly, that was something he felt in his bones. politics are always difficult on trade. >> i agree. i worked a bit on this deal, the beginnings of the steel protection. and i think it was pretty clear that even that action which goes
in the other direction was meant to enable a wider trade agenda. it was a campaign promise first of all end in december, i will be tough wind up as needed, a debate about whether it was needed and all that but tough in this case. and, therefore, you can trust me on the broader trade agenda. i suspect president obama feels the same way that trade is intrinsically good for the american people, for the economy and for individual americans. not every american but for the united states as a whole. the chief economist has a really great paper describing the positive impacts of low prices, low retail prices. he looks at the welfare gains of wal-mart and shows that the low prices at wal-mart provide huge benefit to individual american families, low income families especially. as marc said, the politics are really tough on it. >> yes, please.
>> i was wondering to what degree deficit reduction was an intro concern for the administration, if there was ever a moment where it became a greater concern and people in the ministrations started to wonder if this kind of national debt inconvenience was becoming more of a potential crisis of its own? >> i mean, so my, you know, my time we started with, you know, during the campaign that was projections of larger surpluses. that was not like a huge issue, and it was much more a focus on the long-term in the graphic problems. you could see even back then 15 yourselves also security, medicare, medicaid spending was going to be problematic. and undertake more about the long-term. then as soon as you go into recession though, your policy is going to be focused on expanding
it in the short term, the deficit. and so that's not going to be an area of emphasis. i kind of went from one extreme in my tenure to the other extreme. then it was, i know after i left and the economy stabilized, it was a party to get the deficit back down to what a sustainable level is. the sustainable level has to be something low, 3% of gdp deficit, not necessarily exactly zero, but a lot of it is adjusted been on figuring out whether, where growth is going to be and where the next recession and that will really knock it off target more than you ever realized. >> i remember in early 2008 after the physical stimulus of 2008 was passed, that was a $100 billion which at the time it seemed like a huge amount of money. the staff at the treasury, not political staff, ever stop are
really excellent at funding the government, were worried about could they find $100 billion relatively quickly. they were able to at the treasury continue to be staffed by experts and done a wonderful job of funding to government. since we haven't had the market pressure that would make us, i think the long run problems are still there with entitlement. just one last thought, as an illustration i think of medicare part b which added the drug benefit and, of course, on pharmaceuticals as part of medicare made since. it changed substantially since the 60 but the debate at the time, not want to party or not a part be. the opposed to president bush thought the party wasn't generous enough, there's a donut hole. you ask yourself why does a will to do get any benefit until they run for a couple thousand dollars worth of prescriptions? why do even have the first dollar coverage for someone who
is quite well-to-do? that was the debate, it was not generous enough, and it that the affordable care act made the drug benefit more costly, right, it made it that rich people got first dollar, i'm sorry, anyway, it made other changes to make a more generous and more costly. in some ways it went in the opposite direction in terms of that long run challenge. >> was the that helpful or not helpful in terms of the bush economic policy? >> i would say not helpful. because i am of the belief starting around 1995 and 1997 monetary policy was too easy, and we allowed, we think the country, and massive corporate credit boom in the late 90s and a massive rise in stock prices that been popped and then that was repeated in the 2004,
five, six period when monetary policy was again too easy and allowed home prices to rise dramatically. and so i think inappropriate monetary policy was a fundamental source of the sort of instability that without an asset prices, and is probably one of the biggest source of debate within the monetary policy committee for the financial crisis about whether or not monetary policy should be broader than just looking at a core level of inflation in goods and services. services. >> so fast forward -- >> i want to know what pia -- just kidding. >> let's fast forward. it's not the bush administration your obama administration come is that fed policy that helpful or not helpful in terms of looking at the future?
>> i think that fed policy should be right now be exiting its accommodative policy, that asset prices are again high, that the economy is approaching full employment, and the proper monetary policy would coast the economy into full employment rather than try to run it below full employment for a period which always ends in recession. >> our economy is huge, and i am just wondering internationally, was there ever any influence or suggestion from the state department in effecting economic policy given the fact that anything we do here could have adverse effects or beneficial effects around the world, or the european union or china or whatever? >> i mean, i think you are always trying to get the best information you can't on what's going on. and so if the undersecretary for
economics at state has good information on how china's economy was doing and whether there was a recession building our risk somewhere else in the world, that was always something that was always incorporated at this information about thinking about the future. you know, it kind of went in as a data input point just like the labor market or other things. i don't know that during my time it seemed pretty, you know, u.s.-centric because we were in recession and had 9/11 and that was the dominant, and a 10 years i was there seem to be happening domestically. >> i can add a little bit. to some extent it did then all the people in my experience. al larson was one of the undersecretary's in the position marc mentioned. he was in the same position under president clinton,
longtime career foreign, i forget what they called it, for affairs officer, foreign services -- foreign service officer. he is superb and people listened. so that's one example i did a lot of work on trade policy. the state department was incredibly influential, and rightly so. secretary powell, and so, for example, early in the administration there was a trade dispute between the u.s. and canada over softwood lumber. which has been an ongoing trade dispute. and the state department was very involved in finding a solution, along with the department of commerce, undersecretary in charge of commerce was also excellent in finding a resolution that worked well for our industry and worked well for them and satisfied in our mental concerns. so that's an instance to which the u.s. candidate relationship, those kind of factors meant something for our policy.
>> i thought so as well. our meetings on immigration policy that the state department staff were just really often came with a completely different perspective from the rest of the white house staff edges were really important in terms of bringing in a different view. again, whether they were listened on are not dependent on who it was. but i thought they were really bored just because they are coming with a different perspective. >> what about the dynamic with the treasury department? because certainly i would imagine it could vary based on who the secretary of the treasure is, the relationship to the president and, of course, they used of a significant impact on economy also. so when you came to formalizing economic policy, how did that dynamic work between the white house, council of economic advisers and the department of the treasury? >> that's a great question because i think philip and i have different expenses than when i was there economic policy
was anchored pretty from in the white house. and when he was there it was anchored much more than the treasury department. and again a part of that is dependent on personalities, and mr. paulson was a very strong personality. i think when i came in, at the beginning of any presidency is going to be a concentration in the white house just because you have a group that is bound up and running for two years, that's been doing policy, and that is going to be some continuation of that, and that over time the other departments and agencies will grow. one of the rules about power that is i think applies to almost everything in life he is being physically close is really bored. and so it is an advantage to be sitting in the west wing with
the president versus, even if your treasury secretary sitting in another building, because it's easier for you to just knock on the door of someone next to you, then to someone -- summon someone with all of the formal proceedings that happen. and so that is, it is important. i think if you could see the prejudice of schedule you can almost always see power based on who is oval office time and who is in it. the nec advantage, this is all inside baseball that is important but the nec is one of four super committed along with the nsc, homeland security and domestic policy council. so legally what that means is the chairman of the nec is president of the united states, where the chairman of the cea is the chairman of the cea, and so that makes it the decision-making forum for policy decisions. and the super committees all get
a regular amount of oval office time, and so for the nec we would have enormously economic briefings the week, and that time was where your power came from. and we were attempting to run a process that was as fair and as inclusive as possible. important cabinet secretaries will often get their own separate time, so the treasury secretary might have its own separate time, but seeing who was in the meetings is really important. it's no secret that when i was a better, there was, it wasn't the closest relationship between the head of the nec, my boss larry lindsey, the treasury secretary, paul o'neill. secretary o'neill was coming from being a ceo of a company can sometimes there's an adjustment period for all ceos going into a cabinet position in realizing that they are no longer the top person, and
sometimes there's a transition leader for academics who are used to throwing spears at each other in debates in a way that seems normal to them that doesn't seem no to people who are not academics. >> that's just wrong. >> so with apologies to academics. so sometimes you take those two traits together and it can, you know, it cannot work. so for myself as the deputy of the nec and treasury policy ran very closely, and emma at the deputy level. so like peter fisher who was undersecretary domestic and exceptional, and tim adams who is an undersecretary for international coordinated everything come worked very closely and even when there's some friction at the top, sometimes you can make it work with close ties. it's also the case, i'm sorry am going on too long. the nec has a very difficult
personality role where you were supposed to run an unbiased process, but then you also are, by where you said, an independent adviser to the president. and so i had to be able to separate, when i was in the oval office, to say, you know, mr. president, the treasury secretary is opposed to this policy, and fairly say why he was opposed to it. or the labor secretary is for it and commerce secretary is against it. but also be able to shift hats if he asked me for my own personal advice to give you my own personal advice. most people preferred just to give the personal advice, or won't give a fair representation for the people who are not in the media. so you will see the nec powershift sometimes when you have someone like larry who was there, it was his third time in the white house. you know, harvard professor, fed
governor, all the stuff. we had a lot of capabilities in house to do things, and form our own opinions. and other times you have had to nec that are more process running and then are better at running a for process and that's what the emphasis is on, and then power would be more rested in agencies like the treasures. again it goes back to who happens to be in the job and what they are good at. >> did the vice president have a major role in economic policy? >> so the vice president is, you know, first of all, sort of the public idea that he was running everything and the president wasn't is just completely at odds with everything that happened behind the scenes. and anyone who knows president bush personally, he kind of runs everything that he gets his hands on. and so vice president cheney would sit in on almost every
important meeting. he was the type who would ask really, one really good substantive question. he would be deferential to the people running the bidding process, but vice president do have a separate channel. i mean, they could have lunch with the president on their own and so sometimes their influence can come when other people are not around. around. >> are there any other questions from the audience? we have time for two more questions, so let's go. >> i yes, i have a couple of questions if i can get away with it. one concern i have, turn one, i feel like the bush personnel undersell the good that they did. you make the point that the tax cuts cost $123 trillion over 10 years. i think i can accept that but federal revenues rose on an
annual basis tremendously, over $3 trillion figure. that seems like arguably that tax cuts increase revenue. would you be willing to defend that this afternoon? the other question i would like to ask, is not fair to say the bush administration did urge the congress repeatedly to adopt regulations on the gses in terms of the mortgage crisis? is that a fair thing for the public to understand? >> you know, the tax cuts, the $1.3 trillion i used was the official budget score before they were passed, and so if you believe, like i do, that part of the 3.8% real growth rate after they were passed was due to the marginal rate reduction, and your cost estimate will be a lot lower. and so, you know, larry lindsey did a book on the reagan tax cuts and it had a 41% recovery rate. and so, you know, the estimates for dynamic scoring will be
somewhere between 10-40%, you know, more academics clustered at 10. but to me i look at the numbers and growth was higher. i use that as, that's with no growth assumption change anything, you know, what you would get. gses, when i was there in 2000 when we were holding meetings on them. we wanted to raise their capital standards, and you could just see that the capital level was way too low, and phil is the expert, he would know more what it was. i don't remember anything coming up at the time. but it was something even before we got into the housing boom that we were concerned that they were allowed to this much lower level capitalization than any bank would ever happen. >> the administration took a run
at gses regulation twice after that, after 2001. it must've been 2004, and it didn't go anywhere but that idea has been wants it, increase both the capital standards and to give the regulator more power. companies have much more power than the regulator. and again in 26102007 it was one of the things secretary paulson focused on early in his tenure, and he had a really good relationship with then senate leader reid, house financial services chairman barney frank, and others. and really pushed hard bop still, former deputy mayor of new york after a stomach treasure. they worked a lot on this. it didn't happen until june of '08. so the law didn't get done until the crisis came, which is an unfortunate part of policymaki policymaking. but i think they tried really
hard and in the right direction. >> i'd like to thank all of you for coming today. i'd like to thank pia, marc sumerlin and phillip swagel and, of course, herman berliner. i just one other point i'd like to make, a, i thought they gave us tremendous insight into economic policy was developed in the bush administration, and the next conference in a few years will be on the obama administration. it will be interesting to see an economic policies was formed their, and it varies from administration to administration. by the other point, and the other point, and the i don't meo others our panelists here, but remember their names. i guarantee you they will be big parts in future administrations. because that's how it works. and they had very central roles in the white house, and the federal reserve, and so on. and i think you will hear their
names again and again. and i think they are tremendous assets to the country. and i really feel good people of this caliber are at the point of decision making and policymaking. it makes me feel good and sleep well at night. so thank you all for coming. thank you. [applause] [inaudible conversations] >> coming up on c-span2 a look at whether the fda is on top of new disease treatments regarding the development of what's called precision medicine. then google chief economist talks with twitters former chief counsel about privacy and security on the internet. internet. after that scientists try to answer the question can there be life on mars, a congressional committee looks into the nasa find a possible water on mars.
later, that the smithsonian talk about the future of the museum and research group. >> during this holiday weekend we are showing you on core presentations of q&a each night at seven eastern on c-span2. this evening weekly standards and editor andrew ferguson talks about the potential republican contenders for the 2016 presidential election as well as president obama, cost overruns at the plant eisenhower memorial and the growing number of journalists and pundits in washington, d.c. and each night at eight eastern booktv prime time. tonight come history books.
>> an add-on institute put out a paper earlier this year saying the food and drug administration is behind the curve on approving new disease treatments based on precision medicine. joining the report authors in this discussion was a cancer patient advocate and a medical geneticist. fda officials were invited to join this discussion but declined. this is a one hour 15 minutes. [inaudible conversations] >> hi, everybody. were going to quit and get started. thanks to all of you for being here today. i'm a cynical at the manhattan institute and the opinion editor at forbes. we are here today to discuss bridging the gap between precision medicine and the fda. i know allah of you know me as the obama get in the tub reform got and that's what i worked on in my time at the manhattan institute, but you may not know
that before it came to the man, i spent a dozen years on wall street as an investor were only did was look at clinical trial data and 50 every good for action to try to figure out which company should we invest in. based on developments in medicine and science. this is an area i have long been interested in and so i'm glad to the chance and i was glad that paul invited me to a moderate this discussion today. we talk about how to pay for health care costs, who is uninsured. we don't spend enough time talking about how innovation is transforming the quality of life for millions, if not hundreds of millions of people in america and around the world. the manhattan institute has been a real thought leader in this area. as you may know we have the full institution called project f. be a which is around fda reform. -- project fda.
one of the most productive areas at the manhattan institute and the sense of a developing of a think tank that is doing the work the manhattan institute is doing on this issue. and the question would go to talk about today is one of the most interesting areas in terms of how we think about how to reform the fda. i think people always complain that the fda is too slow in approving innovative new treatments. one of the areas that has come up recently is just this area of precision medicine. what is precision medicine quack?there are these things cad biomarkers. when you go get your cholesterol checked at the doctor's office, that's actually a biomarker. that's what we mean by the term biomarker. a biomarker is a lab test. it's something that we use to correlate something going on in your body with a particular outcome of disease. so when the case of cholesterol